Will the LTC Reform Proposals Go Anywhere?

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The past few months have seen multiple proposals for averting the looming long-term care (LTC) crisis. Among them was an innovative bill introduced in Hawaii’s state legislature to help state residents pay for LTC. Under that proposal, taxpayers who had filed Hawaii tax returns for at least 10 years would be eligible for a $70 daily benefit for up to 365 days to help offset care costs. Taxes on tourists were projected to fund about one-third of the benefit’s cost, and several news articles touted the bill as a potential national model that other states could adopt.

Unfortunately for the bill’s supporters, the state Senate’s Ways and Means Committee decided on Feb. 29 to defer the bill indefinitely, a move that effectively killed it. According to a report on the Honolulu Civil Beat news site, the bill’s sponsors now plan to focus on getting a similar version of the bill passed by the House Finance Committee.

Bipartisan Approaches

The Bipartisan Policy Center, a Washington, D.C.-based think tank, published its initial recommendations for LTC financing in February.

One set of recommendations focused on increasing the affordability and availability of private LTC insurance (LTCI) and proposed:

  • For the roughly half of Americans aged 65 and over who will experience a high level of need for long-term services and support (LTSS), establish a lower-cost, limited-benefit private LTCI product, called “retirement LTCI,” which would also be more sustainable for carriers than traditional products.
  • This lower-cost product would be designed to cover two to four years of benefits after a cash deductible or waiting period were met. The product would also include coinsurance.
  • To make these policies more affordable and encourage Americans to plan for LTSS needs while they save for retirement, employees would be able to use funds in retirement accounts to pay retirement LTCI premiums. Early withdrawals would be penalty-free.
  • To efficiently expand coverage, recommendations include providing incentives for employers to offer retirement LTCI on an opt-out basis through workplace retirement plans and permitting the sale of retirement LTCI through state and federal insurance marketplaces.

The BPC’s recommendations have generally been well-received. “We welcome the advent of the BPC report and recommendations on LTC financing,” Tom McInerney, president and CEO of Genworth Financial, wrote in an email. “As awareness grows of the enormous personal, financial, and family challenges associated with retirement security and long-term care, BPC’s analysis and recommendations offer valuable insight and manageable approaches that will help inform this important policy discussion.

“As the report itself states, no single, sweeping solution can be expected to provide the answer to preparing and paying for this risk — and the most plausible approaches will require both public program and private sector components,” McInerney continued. “The BPC report offers practical and timely options on which we can begin to build a response to this challenge.”

The Long-Term Care Financing Collaborative, a project of the Convergence Center for Policy Resolution in Washington, D.C., also published suggested LTC reforms in February. The key points include:

  • Clear private and public roles for long-term care financing.
  • A new universal catastrophic long-term care insurance program. This would shift today’s welfare-based system to an insurance model.
  • Redefining Medicaid LTSS to empower greater autonomy and choice in services and settings.
  • Encouraging private long-term care insurance initiatives to lower cost and increase enrollment.
  • Increasing retirement savings and improving public education on long-term care costs and needs.

Collaborative member Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center at the Urban Institute in Washington, D.C., is cautiously optimistic about the likelihood the recommendations will be implemented.

“There is obviously no chance anything will happen this year. But next year, we will have a new president and a new Congress,” he wrote in an email. “If there is interest in entitlement reform, there is a good chance lawmakers will address long-term care financing as part of a larger package.

“The Collaborative, which is a politically diverse group, came to understand that modest changes to the private insurance market alone would not be sufficient to make long-term care insurance accessible to most middle-income households,” Gleckman added. “A universal catastrophic program is a heavy lift for Congress, but it is necessary. Because it can substantially reduce Medicaid LTSS costs, such an option may appeal to some lawmakers who would otherwise be skeptical.”